Days before the launch of a 12 billion rupee (Dh961.7 million) initial public offering by Manganese Ore India Limited (MOIL), its chairman, KJ Singh, confidently predicted an investor rush for subscriptions.
Mr Singh listed four reasons for thinking the state-owned mining giant offered not just listing gains but also long-term value for investors.
They were that: the 20.08bn rupee company dominates the domestic market, supplying more than half of the manganese the country uses; it has 21.7 million tonnes of reserves that are expected to last for four decades; it has a healthy balance sheet with cash reserves exceeding 17bn rupees; and it has no debt.
"It will be a very successful IPO," said Mr Singh, adding that the public issue received the highest rating - 5/5 - from the agency Care Ratings.
His prediction is proving right: the IPO was subscribed 5 per cent in its very first hour after launch. Analysts say the 33.6 million shares on offer will be hugely oversubscribed by the time bidding closes on Wednesday.
The US$3.4bn (Dh12.48bn) IPO for Coal India, another state-owned company, last month generated similar exuberance among investors. Its 631.6 million shares were oversubscribed by almost 15 times, attracting bids worth $48.7bn - surpassing the combined GDP of Iceland and Latvia, Bloomberg says.
These IPOs are said to be part of a government strategy to raise badly needed cash through disinvestment in some state companies to fund the country's expensive social schemes for the poor and cut a widening fiscal deficit.
Over the coming years, India plans to sell stakes in at least 60 state-run companies. The government hopes to raise as much as 400bn rupees through disinvestment in the fiscal year ending next March 31.
With MOIL's IPO, the government doubled to 200,000 rupees the investment limit for retail investors in initial share sales because of the surging interest in them.
But analysts say the IPOs are oversubscribed largely because of the demand for investment opportunities in India among foreign institutional investors (FIIs).
The success of the IPOs is a growing sign that emerging economies such as India are fast becoming a new haven for FIIs as they deal with alarming prospects of a double-dip recession in sluggishly growing developed markets.
Foreign fund inflows have surged to an all-time high this year on the expectation that consumer spending will boost corporate earnings in an accelerating economy.
India is the most attractive destination in the world for foreign direct investment after China, according to the UN Conference on Trade and Development world investment prospects survey 2009-2011, which provides an outlook on future trends.
FIIs poured $28.5bn into Indian stocks so far this year, 80 per cent more than last year. The Bombay Stock Exchange reported FII purchases stood at $6.4bn last month alone, close to the inflows of the entire previous year.
India received the highest foreign inflows among Asian stock markets. This year, South Korea and Japan have received FII inflows of $16bn and $13bn, respectively.
India's net FII inflows as a percentage of its market capitalisation is also the highest in the Asia-Pacific region at 1.8 per cent, followed by South Korea at 1.6 per cent.
Foreign institutional investors are estimated to hold almost one third of the value of free-floating shares of the top 500 companies on the Indian stock exchange of India.
Morgan Stanley says the average FII ownership in a sample group of 75 companies touched 20.3 per cent, the highest since 2005.
Foreign investors hold more than 60 per cent of the free-float market capitalisation in stocks such as LIC Housing Finance and Housing Development & Infrastructure, two listed companies.
But many investors are wary of the surging foreign inflows. After reaching a record in 2008, the benchmark Sensex fell 53 per cent, its biggest annual decline, as FIIs pulled nearly $5bn out of the stock market.
India's finance ministry says it is closely tracking FII inflows but is not in favour of curbing them in the stock market as that may harm the sale of public sector shares.
"I do not consider that the situation [warrants a] need to curb foreign fund flows … I do not consider it is going to be too volatile," Pranab Mukherjee, India's finance minister, said last month, citing the market's capacity to absorb the inflows.
But despite strong market fundamentals, foreign investors may be driven off by a growing number of corruption scandals, which are hurting India's image, analysts say.
Last week, India's central bureau of investigation arrested five officials from state-run banks and financial institutions, including the top executive of LIC Housing Finance, charging them with taking bribes in exchange for clearing large corporate loans.
Three officials from a respected private listed company were also arrested on charges of bribery. All deny the allegations. This came to light as India was dealing with a widening scandal in which Andimuthu Raja, the telecommunications minister, resigned this month amid allegations of impropriety in the allocating second-generation mobile phone spectrum licences in a 2008 auction.
Mr Raja denies any wrongdoing.
The growing foreign fund inflows had pushed the 30-share benchmark Sensex above 20,000 points last month, and it was rising close to the peak level of 21,206 it attained in January 2008, just before the onset of the global downturn.
But the corruption scandals created panic in the market, leading to a correction of more than 7 per cent from the recent highs, according to the Bombay Stock Exchange. Some bank stocks corrected by between 15 and 20 per cent after the banking scandal came to light.
Shankar Sharma, the vice president of the Mumbai brokerage First Global, says corruption is a familiar story in India and is unlikely to dissuade long-term investors.
"India's long-term growth story remains intact," Mr Sharma says.
